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Will Maxim's (MXIM) Q1 Earnings Gain From Auto Strength?

Zacks Equity Research

Maxim Integrated Products, Inc. MXIM is set to report first-quarter fiscal 2018 results on Oct 19. The original equipment manufacturer (OEM) of semiconductor analog and mixed signal integrated circuits (ICs) has a wide range of products that allows it to serve a diverse clientele.

Last quarter, the company delivered a positive earnings surprise of 1.61%, the average beat being 4.60%.

The company’s shares have charted a solid trajectory in recent times, increasing 28.3% year to date, outperforming the industry’s gain of 24.9%.

Strength in Industrial & Auto End Markets to Drive Revenues

In the second quarter, Automotive end market generated 20% of revenues, increasing sequentially. Also, Industrial market generated approximately 29%, up sequentially and year over year. Increasing growth in infotainment content and factory automation products in the areas of interface and power management should continue to drive revenues in the upcoming quarter. The Zacks Consensus Estimate for revenues is currently pegged at $575.0 million.

Customer Concentration a Major Hurdle

However, the concentration of Maxim’s mobility revenues at Samsung is a big concern. Samsung’s projections and announcements, especially those related to its high-end models where Maxim has greater exposure, could have a significant impact on Maxim’s performance.

Earnings Whispers?

Our proven model does not conclusively show that Maxim will beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.

Zacks ESP: Maxim has an Earnings ESP of 0.00%. Both the Most Accurate estimate and the Zacks Consensus Estimate stand at 55 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Maxim’s Zacks Rank #3 increases the predictive power of ESP. However, we also need to have a positive ESP to be confident of an earnings surprise.

We caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is witnessing negative estimate revisions.

Maxim Integrated Products, Inc. Price and EPS Surprise

 

Maxim Integrated Products, Inc. Price and EPS Surprise | Maxim Integrated Products, Inc. Quote

Stocks to Consider

Here are a few companies, which you may want to consider as our model shows that they have the right combination of elements to post an earnings beat this quarter.

Applied Materials, Inc. AMAT, with an Earnings ESP of +0.19% and Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Extreme Networks, Inc. EXTR, with an Earnings ESP of +9.75% and a Zacks Rank #1.

MKS Instruments, Inc. MKSI, with an Earnings ESP of +2.74% and a Zacks Rank #2.

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